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Involved discussion on finances and plans to purchase boats

Old 07-22-2002, 09:13 PM
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Originally posted by Shane

In fact, in many circumstances it may be better than paying cash as the interest is tax deductible.

How could it be better than paying cash? Even if the interest is tax deductible, only a portion of the interest you pay will come off of your taxes. Paying cash is always better than paying interest in my opinion. I'm sure some financial analyst in here could/will prove me wrong, but I just don't see how having a loan is better than paying cash. If you have the cash that is...
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Old 07-22-2002, 09:54 PM
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Well, I'll tell you how I did it. I started my own business 5 years ago. Basically I left the audio visual company I was working for and took my clients with me. I was lucky, they wanted to work with me for me and not for the company so they followed me when I left. I'll tell you one thing about making money in a small business. SELL EXPENSIVE STUFF!! For me it worked out great for the first 4 years. If you go and run a dollar store you're going to make what, 10 cents on every sale? That is a going to require a lot of volume to make any money. Go for a high dollar, lower volume business. My average sale runs about $10-20K with some of them running more like $100k. I get half upfront to cover my own upfront costs. I rent equipment to corporations, which sometimes I rent form other companies. I get a discount from these other companies so I can offer the same price and still make a decent profit. When you are talking about a $1.00 sale, 10% is 10 cents. When you are making a $100k sale, 10% is 10k. Big difference. Anyway, that's how I got my Baja. A few good years and some money saved, paid cash for it. Granted, last December when I only had about 5k in the bank I was thinking "maybe I shouldn't have bought that boat after all". But one more $100k job and I was ok. The problem now is that in my first year in business I did about $400k in sales and last year it was more like $150k, and I just lost another big show from Titleist who was my biggest client. They decided to pull out of the PGA Merchandise show that they used to go to every year in Orlando. That means another 100k in sales lost which brings me to about 50k in sales a year. You do the math, even at 30% profit, I am going into the poverty level in terms of income this year. Time to get out and start making sales calls... but it's summer, I want to be on my boat...

If you decide to start a business, be frugal, and save enough to live on for at least 6 months BEFORE you leave your job.

Anybody want to rent a videowall for their next trade show or corporate event? I guarantee you I will have the lowest price in the nation at this point. Now I am thinking more volume, less

If anyone needs ANY A/V for any corporate event, please give me a call. You can check out my not-so-great


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Old 07-22-2002, 11:49 PM
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Default Not very smart, but having fun!!

I guess I'm the only one who spent twice as much on the boat as the house! Definately not smart about investing for the future, but it sure is fun now!!
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Old 07-23-2002, 12:26 AM
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This thread has several pages, and I haven't read but half of the first page, but figured to go ahead and post. I reckon that what I am fixing to say probably has already been covered, but here goes.

There is no guarantee of a secure economy. We all see this right now. Business owners are constantly faced with decisions regarding the outlook for the next few (5 to 10) years. This is no different than the same situation for those who do not own businesses, but are paid employees on somebody's payroll. Business owners can be out of business in short order. Employees can be out of a job in short order (think Enron). Point is, long-term loans for depreciating items is a financial death sentence (or at least a blind roll of the dice).

Boats do NOT appreciate in value (elvis's glasspar not included). IF you cannot devote enough of your spending money to allow you to get an affordable loan for less than 60 months, then don't buy the boat.

Cars are a similar argument, but I say use 36 months for cars.

As far as deductible interest, sure it helps and should be considered in the real cost of the loan - but the 60 month term should still be the limit (IMO).

Expensive hop-ups, etc..
Hop ups rarely increase the value of a boat on the used market in relation to the actual cost of the upgrades. This makes them a bad investment. Only dump hopup money into your rig that you can afford to say bye-bye to in the event of a forced liquidation.

It can be argued that if you get a long-term low-interest tax-deductible loan for a boat that you can use the money saved on the payments to invest and actually make money - sure, it can happen. More of a dice-roll though.
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Old 07-23-2002, 10:52 AM
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BajaBoss252, I think mcollinstn touched on your question at the end of his post. Alot of good business men will take the low interest note, especially if it's tax deductible, and keep the money in the bank drawing more interest than they are paying on the note. This probably only applies on big money. Hope this helps.
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Old 07-23-2002, 02:09 PM
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Default Here is an article that might apply here............

People rarely ask themselves this question when it comes to their financial lives, but it’s a good one. Given your age, your income and your spending habits, are you rich enough?

One way to answer that question was spelled out in a best-selling book by researchers Thomas J. Stanley and William D. Danko, called “The Millionaire Next Door.” It’s a simple little formula, really. It says that your net worth (i.e. the value of all your assets minus the value of all your debts) should equal your age times your annual income, divided by 10.

*If you’re 30 and make $50,000, for example, your net worth should be $150,000.
*If you’re 45 and make $75,000, your net worth should be $337,500.
*If you’re 50 and make $150,000, your net worth should be $750,000.

People with half or less than the expected net worth were deemed “Under Accumulators of Wealth” or UAWs. Those whose holdings totaled twice or more the benchmark were deemed “Prodigious Accumulators of Wealth” or PAWs. The rest are just AAWs -- “Average Accumulators of Wealth.”

The real measure of financial success
Over the years, this formula has popped up on Web sites and in discussion boards as a way people can take their own financial temperatures. Like most financial rules of thumb, however, the Stanley-Danko formula has limited usefulness and the potential to cause some harm. Here’s why:
The formula focuses on income, rather than spending.

The formula ignores individual goals in favor of a one-size-fits-all approach.

The formula overestimates wealth goals for many young people and underestimates them for many older folks.
What really determines success in meeting financial goals, planners say, is not necessarily how much you make, but how much of it goes out the door. Not only will that govern the amount you’re able to save during your working years, but it dictates how big a kitty you’ll need to sustain you after retirement.

Measuring up to the formula -- or not
“I’ve seen people with less than $1 million (in assets) but who spend quite modestly, so that’s enough,” said Seattle financial planner Karen Ramsey, author of “Everything You Know About Money Is Wrong.” “I also see people with $3 million to $4 million who don’t have enough because they spend like crazy.”

Worse, the formula could discourage some folks who are actually doing fine financially, but who don’t measure up to the level Stanley and Danko consider “average.”

A 35-year-old with a $50,000 income and a $130,000 net worth, for example, would be considered a bit of an underachiever by this formula. Yet according to the Federal Reserve’s latest Survey of Consumer Finances, however, she would be in the top 25% of her age group in terms of accumulated wealth.

“If a goal looks unrealistic, it might discourage people,” said Gary Foreman, a former Certified Financial Planner who publishes The Dollar Stretcher, a newsletter and Web site for the frugal called (See link at left.) “Instead of doing what they can to meet their goals, they freeze and don’t do anything.”

Goals of saving for retirement and slashing debt
Foreman actually liked “Millionaire” quite a bit, because the book emphasized that most millionaires got that way by living well below their means and valuing financial independence over status symbols. But he believes people can help themselves more by planning and saving for retirement, and striving to get out of debt, than by setting an artificial wealth goal for themselves.

“If they wanted to set goals, the goal really should be to be mortgage-free by the time they’re 50 or 55,” Foreman said. “If they’re able to pay off that mortgage (before retirement), they’d be doing really well.”

The final problem with the Stanley-Danko formula is that it really falls apart when applied to the young and to the old.

Stanley and Danko wrote that the formula applied to “most people in America with realized annual incomes of $50,000 or more” who were between 25 and 65. The younger or older you are, however, the less helpful the formula seems to be.

The two ends of the spectrum
Imagine you were a 25-year-old lucky enough to nab a job paying $50,000 a year. By the formula’s reckoning, you should have $125,000 accumulated -- and this just four years out of college. That would require saving about 60% of your gross income, which is not a feat most of us are likely to pull off.

Consider the other end of the spectrum, as well. A 65-year-old who makes $100,000 should be fine with $650,000 in assets -- at least according to the formula.

This might be true if he has a generous pension. But otherwise that amount of savings likely wouldn’t be enough to get him through a 20-year retirement, let alone anything longer, unless he’s willing to cut his spending to something under $40,000 a year. The T. Rowe Price retirement income calculator, which uses probability analysis, says that our man would most likely outlive his funds unless he withdrew just $3,185 a month from a diversified portfolio.

So when is this formula useful? The book’s authors hoped it would prod people to realize that a good income doesn’t mean much if you’re not growing your wealth through saving and investing. The formula also underscores that your net worth should be growing over time -- at least until you hit retirement age. If your net worth is slipping -- thanks to lower investment returns, for example -- you may need to save more to reach financial independence.

Mostly, however, the formula is too general to be of much help to most people. Planners suggest the following as better ways to determine if you’re on track financially:

Are you saving at least 10% of your income? Consistently saving 10% to 20% of your income is the best way to make sure you don’t come up short later in life, planners said. If you got a late start, you may need to put away even more. Saving helps in two ways -- by building your assets and by getting you accustomed to living on less, which can help you make your retirement assets last longer.

Are you staying out of debt? Net worth consists of two parts: assets and liabilities. Running up credit-card debt, tapping your home equity or borrowing against your retirement funds whittles away the wealth you can accumulate for tomorrow. Again, paying off debt helps in two ways -- by removing the liability and freeing up the money that used to go for interest payments.

Do you have a plan? Financial success comes from setting goals, making choices and taking action. Someone who wants to retire at 50 will need to make different choices than someone who’s comfortable working longer. Likewise, those who have expensive hobbies -- travel, for example -- will probably need to save more than homebodies.
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Old 07-23-2002, 04:49 PM
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I see where you are coming from Jay, here is my 2 cents. Iam doing what I think is better than most, and not as good as others. I own my own home(HAVE A MORTGAGE) A 2000 FORMULA 271 and own both a car 2002 acura 3.2 tl and a 93 chevy silveraldo. The only way I was able to swing any of these was the fact I was lucky enough to live at home until I was 25 and did not have to rent. I do not have any credit cards!!!! My wife has one so we can rent cars and hotel rooms. I was a plumber working full time making about 40000 a year, and doing side work like it was going out of style. It paid off, I was 24 and like I said I only made about 40000 but that year I did so much side work I made over six digits plus my regular salary. Making this kind of money in that year, and not pissing it away I was able to get a great start in life. I'am a firm beliver that if you dig a hole early in life you will never be able to get out, even if you are making more money. We did a housing development in hopewell and the houses started at 900000 and when I got to meet the differnt owners they were all in their mid 30's and I 'AM thinking how in the world can these people afford these houses? Well I came to this conclusion the money was left to them, it is old money just getting pased down. Or in my sisters situation she just graduated villanova law school and already has a job promise from where she did her internship, startin salary 150000 a year and she takes the bar in two weeks this blows my mind!!! Her and her fiance are looking at 500000 houses on the main line and neither of them has even gotten a pay check yet!! As far as big boats with big smoke, all the outerlimits up at Trenton are owned by business owners, or a major league football player. They are the only ones that have that kind of money to throw around. By the way Jay we have to meet and have a beer, If you want to go out on the river you are more than welcome, you will also be stuck looking at Marks ulgy mug!!!!!
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Old 07-23-2002, 05:19 PM
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You think you could get away with throwing in that last line ........I am everywhere and see everything.

And BTW Jay.....Notice Paul's board name.....hauling ass-a ??? That means someone on board his boat has a pretty big back yard. And you probably wouldn't be able to see my ugly face if your out on his boat, because you would have a large obstruction in your view
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Old 07-23-2002, 05:28 PM
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Oh damn mark, be nice
Sorry I just busted up laughing!!!
Well if he is in southampton, he is what about 45 seconds from my house?
Hell Im going to have a beer when this dude comes up to take a look at the engines and figure the firing problem out.
Have some extra lawn chairs too
more the merrier
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Old 07-23-2002, 05:37 PM
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hey Jay make a party out of it
we can all sit around drink beer and watch this guy work on your boat
i'm in
hell if any out of staters want to come to see Jays boat run
come on down
he won't mind

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